In Michael Cushner, M.D. v. Summit Health Management LLC, Index No. 65930/2024, Justice Gretchen Walsh of the Westchester Commercial Division issued a detailed Decision and Order addressing a motion to dismiss by defendants Summit Health, VillageMD, and City Medical. Dr. Cushner—a former orthopedic surgeon at WestMed—claims he is owed millions under his employment and productivity-based compensation agreements following the acquisition of WestMed by City Medical and its affiliates.

Factual Background

Dr. Cushner alleges that after the acquisition of WestMed in late 2021, he signed both an Employment Agreement and a Productivity Value Unit (PVU) Award Agreement with City Medical. These contracts provided for compensation based on RVU (Relative Value Unit) metrics tied to the volume and complexity of his services. The Employment Agreement advanced him a “Pegged Baseline” salary of $1.89 million, contingent on meeting annual RVU targets (initially set at 35,500 RVUs). Separately, under the PVU Agreement, he stood to earn an additional $1.14 million annually for five years if productivity thresholds were met.

Cushner asserts that his high productivity relied on his use of Advanced Practice Providers (APPs), such as physician assistants, to assist in patient visits. He claims that City Medical initially accepted this practice and confirmed his billing was compliant. However, mid-2022, City Medical allegedly began raising concerns about how APP-assisted visits were coded and then retroactively reduced the number of RVUs credited to him, slashing his 2022 credited RVUs from over 58,000 to roughly 26,800—below the compensation threshold. In 2024, he was terminated without cause.

Dr. Cushner sued, seeking compensation for underpaid 2022 and 2023 RVUs, unpaid PVU bonuses, and future PVU payments. He asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, Labor Law violations, tortious interference, and promissory estoppel.

The Court’s Ruling

Justice Walsh granted in part and denied in part the defendants’ CPLR 3211 motion to dismiss.

1. Breach of the Implied Covenant of Good Faith and Fair Dealing (PVU Payments Post-Termination)

The court dismissed Cushner’s Tenth Cause of Action, which sought future PVU payments despite his termination. The court held that the PVU Agreement unambiguously provided that if Cushner’s employment ended “for any reason,” he forfeited all unpaid PVU payments. Under both New York and New Jersey law, the court explained, an implied covenant cannot override the express language of a contract.

2. Tortious Interference Claims

The court declined to dismiss Cushner’s tortious interference claims against Summit Health and VillageMD. The defendants argued that the “economic interest” defense barred these claims, as the entities shared a business interest in City Medical. However, the court found factual questions as to whether the defendants’ involvement was improper or illegal under New York’s prohibition on the corporate practice of medicine, and whether Summit and VillageMD acted with malice. These issues could not be resolved at the pleadings stage.

3. Breach of Implied Covenant – Compensation Reduction (2022–2023)

The court sustained Cushner’s claim for breach of the implied covenant related to the alleged manipulation of RVU crediting in 2022 and 2023. The court found sufficient allegations that City Medical assured Cushner that his use of APPs would not affect compensation and later changed course after he relied on those assurances.

4. Labor Law § 193 Claim

Cushner’s Labor Law claim survived in part. While the PVU payments were deemed outside the scope of “wages,” the court found that the salary and RVU-based compensation under the Employment Agreement could qualify. Defendants’ argument that the dispute amounted to a mere “calculation disagreement” was rejected at the motion stage.

5. Promissory Estoppel

The court also permitted Cushner’s promissory estoppel claim to proceed. He alleged that defendants promised he would be credited with RVUs even if visits were coded under APPs’ names and that he changed his practices in reliance. The court found this sufficient to state a claim, even if potentially duplicative of the contract claims.

6. Declaratory Relief

Cushner’s request for a declaratory judgment regarding the unenforceability of a restrictive covenant was dismissed as premature. The court found no present controversy, especially given that Cushner had relocated out of state.

Conclusion

Justice Walsh’s decision highlights the court’s careful parsing of employment and compensation-related agreements in complex healthcare mergers. While the PVU agreement’s explicit forfeiture clause barred claims for future bonus payments post-termination, the court found potential wrongdoing in the retroactive reduction of RVUs and misrepresentation of compensation practices. The decision also underscores that management companies operating in the healthcare space may face tort liability where their conduct raises regulatory concerns under New York law.

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In a recent decision by Westchester Commercial Division Justice Linda S. Jamieson, the Court declined to permit a late-stage amendment to the complaint that sought to introduce new claims against an additional corporate defendant. The case serves as a noteworthy example of the court’s careful application of procedural principles and substantive corporate law doctrines—particularly regarding successor liability and the timing of amendments.

Background

Bardy v. Bonnem, Index No. 55909/2023, arises out of an alleged 2016 oral agreement between plaintiff Jack Bardy, a hospitality industry veteran, and defendant Joseph Bonnem, an investor looking to launch a drive-through coffee chain. Bardy claims that the agreement entitled him to an option to acquire a 25% ownership stake in Ready Coffee, LLC (“LLC”)—18% upon payment of $180,000 following the opening of the first location, and another 7% after three years, at a $5 million valuation.

The first store opened in 2019 and was successful. Bardy asserts that he attempted to exercise his option at that time, but Bonnem refused, denying the existence of any such agreement. Bardy did not commence the action until 2023.

Following discovery, Bardy moved to amend the complaint to add Ready Coffee, Inc. (“Inc.”) as a defendant, asserting a new cause of action styled as “De Facto Merger, Mere Continuation, and/or Successor Liability.” Bardy argued that Inc. is a continuation of the same business and should be held liable if he prevails on the merits.

The Court’s Analysis

The court denied the motion, citing both procedural and substantive grounds.

First, Justice Jamieson reaffirmed that claims such as de facto merger, mere continuation, and successor liability are not independent causes of action under New York law. Rather, they are theories of liability that must be tethered to a viable underlying claim. Citing Marcum LLP v. Fazio and Morris v. NYS Dep’t of Tax’n & Fin., the court emphasized that such theories cannot stand alone in a complaint.

Although Bardy attempted to frame the claim as one for declaratory judgment to circumvent this issue, the court found it premature. Under established Second Department precedent, declaratory relief is appropriate only when it will have a “direct and immediate effect” on the parties’ rights. Here, Bardy must first succeed in proving the existence and enforceability of the alleged oral agreement before any issue of successor liability becomes ripe.

Second, the court pointed to the lateness of the proposed amendment. The case is approaching trial-readiness, and the new claim would require extensive additional discovery—particularly into the corporate formation and structure of Inc., including its relationship to LLC. Justice Jamieson cited Brandsway Hosp., LLC v. Delshah Cap. LLC and Ness Techs. SARL v. Pactera Tech. Int’l Ltd. to underscore the prejudice and delay that would result from adding a wholly new defendant and legal theory so late in the litigation.

Conclusion

Justice Jamieson’s decision illustrates the Commercial Division’s balanced approach to late-stage amendments and successor liability theories. While the door remains open for Bardy to pursue claims against Ready Coffee, Inc. in a separate action—should he succeed at trial—this ruling ensures that litigation proceeds efficiently and within the bounds of established procedural rules.

Takeaway

For commercial litigators, the case is a reminder to carefully consider the timing and framing of successor liability claims and the procedural hurdles associated with amending pleadings after substantial discovery has taken place.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

In a recent decision in Beck Chevrolet Co., Inc. v. Brian Levine, Justice Linda S. Jamieson of the Westchester Commercial Division denied a motion for preliminary injunction brought by a Westchester-based car dealership against its former Sales Manager. The decision is a cautionary tale for employers asserting trade secret claims and seeking injunctive relief without sufficient evidentiary support.

Background

Plaintiff Beck Chevrolet sued its former Sales Manager, Brian Levine, alleging misappropriation of confidential customer lists following Levine’s departure. The dealership sought a preliminary injunction to prevent Levine from using its customer information at his new place of employment—a competing General Motors dealership in the Bronx.

In support of its motion, Beck Chevrolet submitted affidavits from its President and a longtime customer, as well as screenshots of Levine’s social media activity. The dealership claimed Levine had solicited customers he worked with during his time at Beck and that he had improperly retained customer information, specifically “Buyers Order” documents listing transaction details.

Levine opposed the motion with a detailed affirmation asserting that he had not taken or misused any confidential material. He explained that the transaction records were returned upon his departure and had not been copied or used. He also pointed out that: (1) the customer information was either already in his possession due to longstanding relationships or was publicly available; (2) the same data is accessible to salespeople at all GM dealerships, not exclusive to Beck Chevrolet; and (3) many of the customers referenced were individuals who had followed him from a prior dealership and maintained ongoing relationships with him, independent of Beck.

He further denied soliciting customers prior to joining his new employer and refuted specific allegations, including a timeline inconsistency from Beck’s witness.

Legal Framework

Justice Jamieson reviewed the motion under the familiar three-part standard for a preliminary injunction under CPLR § 6301: (1) likelihood of success on the merits; (2) irreparable harm absent injunctive relief; and (3) a balancing of the equities in favor of the movant.

Noting that injunctive relief is a “drastic remedy,” the court emphasized the requirement for clear and convincing evidence to support each element.

The Court’s Analysis

Justice Jamieson denied the motion in its entirety, finding that Beck failed to demonstrate a likelihood of success on the merits of its misappropriation claim.

The court observed that Beck had not even filed a complaint, forcing the court to infer the likely claims from its motion papers. Construing the request as one grounded in trade secret misappropriation, the court found the record lacking. In particular:

  • Beck’s assertions that its customer lists were confidential were conclusory and unsupported by admissible evidence.
  • By contrast, Levine provided sworn statements explaining that the relevant information was available through GM systems to any authorized dealership employee and often came from his own personal contacts.
  • The court held that customer identities and transaction details available to other GM dealerships or already in a salesperson’s possession do not constitute protectable trade secrets.

Additionally, the court noted the absence of any contractual or fiduciary duty prohibiting Levine from using general customer information, especially where that information was not confidential and was lawfully obtained.

Lastly, the court found the testimony of Beck’s customer witness unconvincing, particularly since the timeline of the alleged solicitation did not align with when Levine began discussions with his new employer.

Conclusion

Justice Jamieson’s decision reinforces the high burden plaintiffs face when seeking preliminary injunctive relief based on alleged trade secret violations. Merely asserting that customer information is “confidential” is insufficient, particularly where the information is readily available through other lawful means and not subject to any restrictive agreement. 

The ruling also highlights the importance of substantiating claims with detailed, credible evidence—especially when seeking the “drastic remedy” of an injunction.

This case will now proceed without the restraint of a preliminary injunction, leaving Beck Chevrolet to pursue its claims, if any, through the standard litigation process.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

Embracing Technology Disputes and Enhancing Efficiency with Referee Appointments

A recently issued Administrative Order by the Chief Administrative Judge of the Courts (AO/77/24, dated February 14, 2024) brings two important changes to the Commercial Division Rules that will affect case jurisdiction and case management.

Expanded Jurisdiction for Technology-Related Matters

What’s New?

Section 202.70(b)(1) of the Uniform Rules for the Supreme and County Courts has been amended to explicitly include “technology transactions and/or commercial disputes involving or arising out of technology” among the examples of commercial cases eligible for Commercial Division treatment. This change confirms the Division’s authority to handle disputes where technology plays a central role.

Why This Change?

In its accompanying memorandum, the Commercial Division Advisory Council emphasized that technology is an increasingly vital element in modern business. With New York positioned as both a financial and technology hub, the amended rule ensures that the Commercial Division’s sophisticated expertise is leveraged for disputes arising from technology-related business transactions. The memorandum notes that several other states’ business courts have already embraced this approach, underscoring the importance of a clear statement regarding the Division’s jurisdiction over technology disputes. ​

Introduction of Commercial Division Rule 9-b – The Referee Option

What’s New?

The new Rule 9-b, added to Section 202.70(g) of the Rules, provides that “on consent of the parties, and with the agreement of the Court, any person may be appointed by the Court to act in place of the assigned Supreme Court Justice, to determine any or all issues or to perform any act, with all the powers of the Supreme Court.” This innovative provision aims to offer an alternative mechanism for resolving complex issues without overburdening the judicial docket.

Why Introduce Referees?

According to the accompanying memorandum from the Commercial Division Advisory Council, the use of referees has been underutilized in New York. Referees—particularly experienced private practitioners—can efficiently handle numerous or complex issues in litigation, such as cases with multiple emergency rulings or extensive procedural orders. By delegating certain adjudicative functions, the Division seeks to expedite case resolution and preserve judicial resources for the most resource-intensive disputes. ​

Final Thoughts

These amendments signal a proactive effort by the Commercial Division to modernize its practices and to ensure that its jurisdiction reflects today’s business realities. By explicitly embracing technology-related disputes and introducing a flexible referee mechanism, the Division reinforces its commitment to efficiency and to resolving complex commercial litigation in a timely manner.

Stay tuned for further insights as these changes take effect, and please feel free to reach out with questions on these developments.

Sources: Administrative Order AO/77/24 ​; Commercial Division Advisory Council Memoranda on technology and referees.

An order of attachment is a provisional remedy that prevents a defendant from disposing of assets during the pendency of an action. In cases in which a defendant disposes of property with intent to defraud creditors or frustrate the enforcement of a judgment, Article 62 of the CPLR provides a mechanism to preserve those assets. Westchester Commercial Division Justice Linda Jamieson recently granted this remedy in Richard Stadtmauer et al. v. Mark Nordlicht et al., Index No. 51825/2020.

The Facts

In 2003, Nordlicht co-founded the Platinum Funds, a Manhattan-based family of hedge funds. PPVA was Platinum Funds’ signature fund and a master fund with three feeder funds. Plaintiffs are two investors in PPVA who lost millions of dollars following the fund’s collapse. Nordlicht personally guaranteed repayment of certain promissory notes issued to Plaintiffs by PPVA.

In January 2020, in a JAMS arbitration commenced by Plaintiffs against Nordlicht to enforce the personal guaranty, Hon. Bernard Fried (Ret.) issued a final award in favor of Plaintiffs in the amount of $14,896,316.16. Immediately thereafter, Plaintiffs commenced a proceeding in the Southern District of New York to confirm the award. Nordlicht sought to have the award set aside on the grounds that he lacked the resources to pay it.

Plaintiffs simultaneously commenced an action in the Westchester Commercial Division, asserting claims for constructive fraudulent transfer, actual fraudulent transfer, and reverse veil piercing to unwind Nordlicht’s scheme, and seeking a prejudgment order of attachment preventing Defendants from transferring, encumbering, or otherwise affecting title to the properties in New Rochelle and New York City.

Applicable Legal Standards

As Justice Jamieson held, “[t]he law on attachments is well-settled” and Plaintiffs’ burden “is onerous.” The Second Department has explained: “Attachment is a provisional remedy designed to secure a debt by preliminary levy upon the property of the debtor to conserve it for eventual execution, and the courts have strictly construed the attachment statute in favor of those against whom it may be employed.” Hume v. 1 Prospect Park ALF, LLC, 137 A.D.3d 1080, 1081, 28 N.Y.S.3d 125, 126 (2d Dep’t 2016).

“In order to obtain an order of attachment under CPLR 6201(3), the plaintiff must demonstrate that the defendant has or is about to conceal his or her property in one or more of several enumerated ways, and has acted or will act with the intent to defraud his or her creditors, or to frustrate the enforcement of a judgment in favor of the plaintiff.” Mineola Ford Sales Ltd. v. Rapp, 242 A.D.2d 371, 371, 661 N.Y.S.2d 281, 282 (2d Dep’t 1997) (citations omitted).

Further, “[t]he moving papers must contain evidentiary facts – as opposed to conclusions – proving the fraud.” Id. “In addition to proving fraudulent intent, plaintiffs must also show probable success on the merits of the underlying action ….” Id. (citations omitted). Finally, “the movant must show that the amount demanded from the defendant exceeds all counterclaims known to the plaintiff.” Reed Smith LLP v. LEED HR, LLC, 156 A.D.3d 420, 420, 67 N.Y.S.3d 9 (1st Dep’t 2017).

Application

Plaintiffs argued that Nordlicht strategically disposed of substantially all of his assets by placing them beyond the reach of his creditors under the names of his wife, various LLCs, trusts, overseas entities and other shell entities. They explained Nordlicht’s modus operandi for disclaiming legal ownership of his assets while still exercising control:

“Mr. Nordlicht has arranged his affairs to transfer and keep assets out of his name and to avoid being held accountable to creditors. To carry out this scheme, Mr. Nordlicht has adopted a specific modus operandi in his financial arrangements. First, Mr. Nordlicht organizes a shell company with his wife, Ms. Kalter, having nominal ownership and control. Second, notwithstanding his ownership in name, Mr. Nordlicht in fact controls and dominates the shell company, directing or participating in substantially all financial decisions for it. Third, any funds or interests in the shell company are extracted to accounts held by Ms. Kalter or another closely affiliated party, such as a family-owned LLC or trust.”

Justice Jamieson found that Plaintiffs adequately explained Defendants’ “intricate attempts to insulate Nordlicht from his significant creditors, with ample, substantiated details” and that Defendants acted with the required fraudulent intent.

Further, many of Defendants’ positions – for example, that Ms. Kalter was the only one with control over a given LLC – were rejected as “entirely implausible or directly contradicted by evidence that plaintiffs submit on reply.” Although Ms. Kalter claimed to be the only one who ever had control over a particular entity, Plaintiffs submitted emails showing that Nordlicht in fact had control. Plaintiffs also submitted, among other evidence, documents with “two extremely different versions of Kalter’s signature, claiming that one of those versions is a forgery.”

Finally, the amount demanded against Defendants exceeded the value of any counterclaims as the arbitration award conclusively resolved all counterclaims against Nordlicht, who received nothing.

Accordingly, Plaintiffs were granted an order of attachment.

Takeaways: Disposing of one’s assets that should be subject to execution to satisfy outstanding debts will not render oneself “judgment proof.” And, to obtain an order of attachment, plaintiffs must satisfy an onerous burden.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

Business litigation often involves both contract and tort claims. A fraud or negligence claim that is deemed “duplicative” of a breach of contract claim, however, will be dismissed. When is that the case? The Westchester Commercial Division and the Appellate Division, Second Department recently answered this question in Oceanview Associates, LLC v. HLS Builders Corp., et al., Index No. 51687/2018, 2020 N.Y. Slip Op. 03519 (2d Dep’t June 24, 2020). 

Oceanview Associates, LLC commenced this action to recover damages for an allegedly defectively constructed parapet wall on the roof of a multi-unit residential building. The defendants included the project’s general contractor and superintendent of construction. The complaint asserted claims, inter alia, to recover damages for breach of contract, negligence, and fraud.

Westchester Commercial Division Justice Linda S. Jamieson dismissed the defendants’ negligence and fraud claims pursuant to CPLR 3211(a) on the grounds that the allegations underlying those claims were the same as the allegations underpinning the breach of contract claim. The plaintiff appealed.

The Second Department affirmed the dismissal of the plaintiff’s negligence claim.

“[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated …. This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.” Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389 (1987) (citations omitted). “Put another way, where the damages alleged ‘were clearly within the contemplation of the written agreement … [m]erely charging a breach of a ‘duty of due care,’ employing language familiar with tort law, does not, without more, transform a simple breach of contract into a tort claim.’” Dormitory Auth. of the State of N.Y. v. Samson Constr. Co., 30 N.Y.3d 704, 711 (2018) (quoting Clark-Fitzpatrick, Inc., 70 N.Y.2d at 390).

Against this backdrop, the Second Department agreed with the Westchester Commercial Division and concluded: “Here, the complaint did not allege facts that would give rise to a duty owed to the plaintiff that is independent of the duty imposed by the parties’ contract” (slip op. at 3-4).

The Court also affirmed the dismissal of the plaintiff’s fraud claim.

“[W]here…a claim to recover damages for fraud is premised upon an alleged breach of contractual duties and the supporting allegations do not concern representations which are collateral or extraneous to the terms of the parties’ agreement, a cause of action sounding in fraud does not lie.” McKernin v. Fanny Farmer Candy Shops, 176 A.D.2d 233, 234 (2d Dep’t 1991).

Here, the Second Department held that as the plaintiff’s fraud claim was based on the same allegations as its breach of contract claim “and amounted to nothing more than a failure to perform under the contract” (slip op. at 4) (citations omitted), its dismissal was proper.

Takeaway: To survive a challenge that a tort claim is really just a contract claim in tort claim clothing, a party must sufficiently allege that a legal duty, independent of the contract itself, has been violated.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

On Monday, June 8, I co-moderated a Virtual Town Hall discussion with Hon. Linda S. Jamieson and Hon. Gretchen Walsh about litigating in the Westchester Commercial Division during COVID-19 and beyond, the Court’s operations, and the methods the justices are using to move cases forward. The justices have worked very hard throughout the pandemic, and we’re grateful for the time they took out of their busy schedules to speak with members of the Westchester County Bar Association. Here are some key takeaways:

Transition to Virtual Court

The justices have been using Skype for Business, the only video conferencing platform authorized by the New York State Unified Court System. Overall, conducting conferences and oral arguments via Skype for Business has been a smooth transition and efficient. Justice Jamieson views the use of virtual platforms as the wave of the future, at least for conferences, and encourages lawyers to do a test run before a real conference.

In addition, the justices have been flexible with attorneys during the pandemic, as they realize that it’s an especially difficult time for those with young children at home. If lawyers don’t have the ability to use Skype, the justices allow them to call in. But while the justices are understanding when it comes to attorneys’ ability to be productive at home, they don’t appreciate attorneys taking advantage of the increased flexibility.

Finally, Justice Walsh has found that the level of civility has gone up tremendously during the pandemic.

Trials

The justices agreed that trials would be difficult to conduct virtually. Both expressed concern about the ability to assess witness credibility via Skype, as it is hard to evaluate body language virtually. The justices also noted that attorneys may be uncomfortable cross-examining a witness that is not physically on the stand, as there is a risk that the witness is not answering the questions on his/her own.

As for the return of in-person jury trials, the justices agreed that they would not require jurors to come into the courthouse any time soon. Justice Jamieson noted that neither judges nor jurors want to expose themselves to COVID-19, and, it would require a great deal of maneuvering to safely space out jurors in the courtroom. Justice Jamieson believes that we’ll start to have jury trials at some point after a vaccine is available.

Settlement and ADR

The justices have been reaching out to lawyers to encourage them to settle and, during the pandemic, they have been successful in settling cases.

To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

It is not uncommon for litigants to sit on their rights and, after years have passed, argue that they are entitled to delayed accrual of their claims under the discovery rule. This was the key issue in a recent decision by Westchester Commercial Division Justice Linda S. Jamieson in Gelaj v. Gelaj, et al., Index No. 68512/2019.

The Facts

Plaintiff Pashko Gelaj is the nephew of defendant Miter Gelaj (“Miter”). Plaintiff alleged that in 2009, he and his father, non-party Ndue Gelaj (“Ndue”), were equal owners of 111 East Mosholu Corp. (“Company”). Miter, however, always claimed that he was a half-owner of the Company with Ndue and Plaintiff had no interest. Critically, in 2015, Miter commenced an action concerning that issue, in which Plaintiff was a defendant.

In July 2009, the Company sold a piece of property. Plaintiff alleged that it was sold “with the expectation that half of the proceeds from the Property’s sale would be invested on [Plaintiff’s] behalf,” but alleged nothing more concerning his “expectation.” The Complaint further alleged that the proceeds were split between Ndue and Miter. Defendant Rocco Adonna, a financial advisor working for defendant AFM Advisor Group, allegedly helped both Ndue and Miter invest the proceeds of the sale.

According to Plaintiff, in April 2018 – nine years after the sale – he “inquired” about the status of his share and learned that his alleged half of the proceeds went to Miter. The Complaint was silent about the details of Plaintiff’s inquiry. Eighteen months later, Plaintiff brought four claims against Miter: fraud, constructive trust, conversion and unjust enrichment. The defendants moved to dismiss each of these claims as time-barred.

Fraud

It is well settled that “the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff discovered the fraud … or could with reasonable diligence have discovered it.” Monteleone v. Monteleone, 162 A.D.3d 761, 762, 78 N.Y.S.3d 247, 248-249 (2d Dep’t 2018). Further, “[a] cause of action based upon fraud accrues, for statute of limitation purposes, at the time the plaintiff possesses knowledge of facts from which the fraud could have been discovered with reasonable diligence.” Id.

In that regard, “[t]he test as to when fraud should with reasonable diligence have been discovered is an objective one.” Gutkin v. Siegal, 85 A.D. 3d 687, 688, 926 N.Y.S.2d 485, 486 (1st Dep’t 2011). “Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him.” Id.

Here, the transaction that gave rise to Plaintiff’s claim occurred in 2009, so the six years expired in 2015. But Plaintiff relied on the two-year discovery rule, arguing that he had no reason to distrust his uncle and doubt that he would invest the proceeds on his behalf. Justice Jamieson, citing Gutkin, supra, disagreed:

This narrative removes from plaintiff all responsibility for ensuring that the substantial proceeds were invested on his behalf. Rather, it paints a vision of a harmonious family in which plaintiff’s wishes would be carried out by Miter without question. This picture, however, is not reality. In 2015 … Miter commenced a litigation against both plaintiff and his father, among others, asserting that he – and not plaintiff- owned half of the company. Even if plaintiff was excused from not inquiring about the status of his alleged investment in 2009 or for six years thereafter, there is simply no excuse for not inquiring once he learned that Miter claimed an ownership right in the company to his exclusion. That should have been the red flag to plaintiff that caused him to inquire about the 2009 investment. [Emphasis added].

Accordingly, Plaintiff’s fraud claim was dismissed.

Constructive Trust, Unjust Enrichment, and Conversion

For a constructive trust claim, the six-year statute of limitations starts to run “upon the occurrence of the wrongful act giving rise to a duty of restitution and not from the time the facts constituting fraud are discovered.” Auffermann v. Distl, 56 A.D.3d 502, 502, 867 N.Y.S.2d 527, 528 (2d Dep’t 2008). Despite being unaware of the exact date, Plaintiff argued the wrongful act occurred when Miter withdrew the funds out of his personal investment account and used them. Justice Jamieson rejected this argument, finding that the complaint plainly stated that the wrongful act occurred at the time of the July 2009 sale when Miter deposited the proceeds into his own account. “The alleged wrong occurred when Miter put the money in his own account ‘rather than for the benefit of the plaintiff,’ not when he later took the money out of the account and used it.” Thus, the six-year statute of limitations had expired in 2015.

An unjust enrichment claim also has a six-year statute of limitations, which runs upon the occurrence of the wrongful act. Coombs v. Jervier, 74 A.D.3d 724, 724, 906 N.Y.S.2d 267, 269 (2d Dep’t 2010). Again, as the wrongful act occurred at the time of the July 2009 sale, this claim was time-barred as well.

Finally, for a conversion claim, “a three-year statute of limitation applies and runs from the date that the conversion took place, not from the discovery of the theft.” Torrance Const., Inc. v. Jacques, 127 A.D.3d 1261, 1265, 8 N.Y.S.3d 441, 446 (2d Dept. 2015). As the statute of limitations expired three years after the 2009 sale, this claim was time-barred.

Takeaway: Plaintiffs should not sit on their rights and then rely on the discovery rule to save a fraud claim.

George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.

Join us on Monday, June 8, as Lachtman Cohen P.C. partner Brian Cohen co-moderates a Virtual Town Hall discussion with Hon. Linda S. Jamieson and Hon. Gretchen Walsh about litigating in the Westchester Commercial Division during COVID-19 and beyond.

See the invite for details: WCBA June 2020 Event Flyer

Register with the Westchester County Bar Association.

In civil litigation, contempt is the most severe sanction available because it can subject the offender to fine or imprisonment. A motion for civil contempt was the subject of a recent decision by Westchester Commercial Division Justice Linda S. Jamieson in Matter of Prisco v. L’Aquila Realty LLC, Index No. 58654/2018, a case concerning the breakup of a family business that we discussed in an earlier post.

The Facts

On July 8, 2019, the parties appeared before Justice Jamieson and read into the record a stipulation, in which they agreed to several buyouts that would end their business relationship (“Stipulation of Settlement”). The parties ordered the transcript and submitted it for the Court to So-Order.

On July 22, 2019, the parties privately agreed to amend the Stipulation of Settlement and executed an “Amendment to Stipulation” (“Amendment”), adding several terms to the original agreement, including that Angela Prisco “shall remove the Prisco TV name from its business.”

On September 16, 2019, Justice Jamieson So-Ordered the Stipulation of Settlement, but not the Amendment, which was not presented to the Court.

On December 16, 2019, John Prisco moved to hold Angela Prisco in contempt, arguing that she continued to use the Prisco TV name and in so doing failed “to comply with the so-ordered Stipulation.”

The parties’ agreement concerning the use of the Prisco TV name, however, was not part of the So-Ordered Stipulation of Settlement – only the (private) Amendment.

Applicable Legal Principles

Judiciary Law § 753 gives courts the power “to punish, by fine and imprisonment, or either, a neglect or violation of duty, or other misconduct by which a right or remedy of a party to a civil action or special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced.” Id. The purpose of a civil contempt order is “vindication for individuals who have been injured or harmed by a contemnor’s failure to obey a court order.” Town of Southampton v. R. K.B. Realty, LLC, 91 A.D.3d 628, 630, 936 N.Y.S.2d 228 (2d Dep’t 2012). As such, “[c]ivil contempt fines must be remedial in nature and effect and awards should be formulated not to punish an offender, but solely to compensate or indemnify private complainants.” Id. (citations omitted).

A party seeking an order of contempt must meet a high standard: “[t]o prevail on a motion to punish a party for civil contempt, the movant must demonstrate that the party charged violated a clear and unequivocal court order, thereby prejudicing a right of another party to the litigation.” Pathak v. Shukla, 164 A.D.3d 687, 688, 81 N.Y.S.3d 549, 551 (2d Dep’t 2018) (citations omitted). “To satisfy the prejudice element, it is sufficient to allege and prove that the contemnor’s actions were calculated to or actually did defeat, impair, impede, or prejudice the rights or remedies of a party.” Pathak, 164 A.D.3d at 689, 81 N.Y.S.3d at 551 (citations omitted). “[T]he movant bears the burden of proving the contempt by clear and convincing evidence.” Savel v. Savel, 153 A.D.3d 872, 873, 61 N.Y.S.3d 97 (2d Dep’t 2017).

Finally, “[w]hile a Court has the power to punish a party for Civil Contempt under Judiciary Law § 753(A) the invocation of this extraordinary relief is narrowly and strictly construed.” Kelly J.A. v. Robert F.A., 2007 N.Y. Misc. LEXIS 5429, *1 (Sup. Ct. Queens County July 16, 2007) (emphasis added).

In this case, the movant didn’t get the memo.

The Court Denies the Motion

Citing Pathak, Justice Jamieson denied the motion. “In this case, the only document that absolutely forbids [Angela] from using the Prisco name is the parties’ amendment to their stipulation of settlement,” the Court held. “It is not a Court-ordered document, and thus not ‘a clear and unequivocal court order’” (emphasis added). Justice Jamieson then cautioned, inter alia: “Should movant make another motion, he must take care to cite law in support of the relief he seeks.”

With that admonition, the movant may have gotten off easy. In Pathak, where the non-movant did not violate a court order (like Angela Prisco here), the movant was sanctioned for frivolous conduct and the non-movant was awarded his attorney’s fees incurred in opposing the motion.

Takeaway: Courts insist on strict and literal construction of contempt statutes, so motions for civil contempt should be used sparingly.

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